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January 27, 2014

Barron's 2014 Roundtable Highlight

So there might be international demand for U.S. bonds. There might be corporate demand, mainly from pension funds. All this could serve to mute a rise in interest rates....

The Goldman Sachs economics team is forecasting gross-domestic-product growth of 3.3%. The sources of growth include less fiscal drag than last year, when the payroll tax was increased, and some improvement in domestic demand. We are seeing improvement in the labor markets and household disposable income, and spending has increased. This is evident in auto sales and housing. Also, U.S. companies with strong balance sheets are likely to divert money from dividend increases and share repurchases to business fixed investment...

....we're expecting S&P earnings of $116 in 2014. If there is no P/E multiple expansion, that gets you to a level of 1900 on the S&P 500. If core inflation stays under control this year -- it could rise by less than 2% -- history suggests that stocks could trade for 18 to 20 times earnings.